Monday, May 9, 2011

Association's Demand For Rent has been challenged!

Falling under the category of "it was bound to happen," a Fort Myers condominium association and its management company have been sued by a corporation which owns 8 units in the Windsor West Condominium community. TCR Holdings, Inc. bought the units back in 2002 with the intention to rent them out. However, the company soon became delinquent on the properties, failing to pay the association while still maintaining tenants in the units.

The association then took advantage of the changes to the Condominium Act passed during the 2010 Legislative Session enabling them to collect rent from tenants in units that are delinquent with the association. The specific language from Section 718.116(11) is as follows:
If the unit is occupied by a tenant and the unit owner is delinquent in paying any monetary obligation due to the association, the association may make a written demand that the tenant pay the future monetary obligations related to the condominium unit to the association, and the tenant must make such payment. The demand is continuing in nature and, upon demand, the tenant must pay the monetary obligations to the association until the association releases the tenant or the tenant discontinues the tenancy in the unit. The association must mail written notice to the unit owner of the association's demand that the tenant make payments to the association. The association shall, upon request, provide the tenant with written receipts for payments made. A tenant who acts in good faith in response to a written demand from an association is immune from any claim from the unit owner.

The Florida Legislature wisely granted this significant relief to struggling condominium associations last year in recognition of the inherent unfairness of delinquent owners continuing to collect rent from tenants while their neighbors shoulder their share of the community's assessment obligations. Again this Session (which just ended last Friday), the Legislature has revisited the issue and clarified in HB 1195 that associations can demand FULL rent from tenants in delinquent properties as well as creating a statutory form to be used for such rent demand.

TCR Holdings, Inc. apparently had no problem collecting rent while not paying its assessments and balked when the association demanded rent from its tenants and evicted those tenants who didn't pay. As a reesult, TCR filed suit on April 29, 2011 in the U.S. District Court in Fort Myers claiming that the statutory relief granted to associations to collect rent is unconstitutional.

The following link will take you to a copy of the docket sheet in this case and all exhibits including the complaint. The association has not yet made an appearance in the case so association counsel has not responded to the allegations. Stay tuned for more details to follow.
http://www.canfl.com/Documents/TCR%20Holdings%20v%20Windsor%20West%20COA.pdf

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

4 comments:

  1. Is it possible the association may be deemed as having no standing in the rental relationship despite the legislation?

    ReplyDelete
  2. Standing is one angle that can be attacked as well as unconstitutional impairment of contract. Still, I think a delinquent owner will have a difficult time convincing a trier of fact that he or she should be entitled to collect rent while stiffing his and her neighbors on assessments. Even if the judiciary rules that the Legislature overstepped its bounds in granting this relief to struggling associations, communities will still have the ability to seek redress in the courts via equitable relief and the appointment of a Receiver to collect rent; this is what was done prior to the law being passed last year. I suspect it will be the avenue used should the demand for rent language be deemed unenforceable.

    ReplyDelete
  3. Donna, thank you for the documents and the article. After reading the complaint, I cannot imagine a weaker argument.

    I would argue there is unquestionably standing for the association in this issue, as a lease is an ownership interest in property, and the Association also has a property right in the units. Though, for purposes of this case, standing is not really an issue to be decided by the judge.

    Instead, the issue is whether the statute is constitutional as applied and on its face. There is almost no credible argument for a facial challenge to the statute, at least not based on any argument appearing in this weak complaint. As for an "as applied" challenge, well, I would hate to be the attorney trying to make this argument in front of the judge with a straight face. The abject failure to make any payments to the Association, but then to beg the court to allow the landlord to skirt its responsibilities... yeah, good luck with that one!

    By the very attachments, the landlords were placed on notice, thus that portion of the due process argument fails. Whether there was any meaningful opportunity to be heard (the second part of due process), I would argue they absolutely do... in the eviction litigation. The landlord could certainly intervene, as they have standing in this litigation. If they could prove their payment, or show that the amounts due were improper, they could avoid the eviction... that is meaningful participation in my book.

    And no, there is no writ of attachment in these demands. The tenant's VOLUNTARY compliance with the Association's demand is not equivalent to a writ of attachment, far from it.

    Of course, all judges are human and could bring a completely different perspective than I would, as a biased participant in this field!

    Again, Donna, thanks for the head's up and documents!

    Dave

    ReplyDelete
  4. Hello Donna,

    Thanks for posting. I have eagerly returned for any updates as I have a rent collection firm that specializes in this field.

    Any idea when this case will be heard?

    Thank you.

    ReplyDelete